State of Illinois
90th General Assembly
Legislation

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90_SB0167

      New Act
      35 ILCS 5/203             from Ch. 120, par. 2-203
          Creates the Illinois State Ensured College and University
      Responsive Education Trust Act and amends the Illinois Income
      Tax Act. Provides for advance tuition payment contracts which
      assure the payment of tuition for the  specified  beneficiary
      of  such  a  contract  at  a  public  university or community
      college of the State.  Provides for the terms and  conditions
      to  be included in the contracts and for a board of directors
      of  the  Illinois  State  Ensured  College   and   University
      Responsive  Education  Trust.  Provides  that  a taxpayer may
      deduct from State personal  income  taxes  amounts  paid  for
      advance tuition contracts. Effective immediately.
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                                               LRB9001905THpk
 1        AN  ACT  to create the Illinois State Ensured College and
 2    University Responsive Education Trust and provide for advance
 3    tuition payment contracts, amending an Act therein named.
 4        Be it enacted by the People of  the  State  of  Illinois,
 5    represented in the General Assembly:
 6        Section  1.  Short  title.   This Act may be cited as the
 7    Illinois State  Ensured  College  and  University  Responsive
 8    Education Trust Act.
 9        Section  5.  Findings.  The General Assembly hereby finds
10    and declares the following:
11             (1)  It is a fundamental goal of this State to allow
12        all persons to obtain the highest education possible at a
13        reasonable cost.
14             (2)  It  is  a  primary  responsibility   of   State
15        government  to  encourage  attendance  at institutions of
16        higher education.
17             (3)  It is an essential function of State government
18        to provide assistance and aid to the People of this State
19        in obtaining an education.
20             (4)  The cost of obtaining a higher education places
21        a heavy burden on and is prohibitive for many citizens of
22        this State.
23             (5)  The cost of providing assistance for the People
24        of this State to obtain a higher education places a heavy
25        burden on the State and federal government.
26             (6)  Many higher education assistance  programs  are
27        causing  more  citizens  of  this State to join a growing
28        "debtor class" of people.
29        Section 10.  Purpose. The General Assembly  declares  the
30    purposes  of  this  Act  and of the State Ensured College and
                            -2-                LRB9001905THpk
 1    University Responsive Education Trust created by this Act  to
 2    be:
 3             (1)  to   encourage   education  and  the  means  of
 4        education;
 5             (2)  to encourage the People of this State  to  plan
 6        in  advance  for  the  cost of their higher education and
 7        that of their children;
 8             (3)  to provide wide and affordable access to  State
 9        institutions  of  higher  education  for the residents of
10        this State;
11             (4)  to provide protection against the  rising  cost
12        of obtaining higher education to residents of this State;
13             (5)  to  reduce  the  burden  on  State  and federal
14        governments to provide higher education assistance to the
15        citizens of this State;
16             (6)  to  provide  alternatives  to  current   higher
17        education assistance programs; and
18             (7)  to   provide  a  secure  method  by  which  the
19        citizens  of  this  State  may  afford  access  to  State
20        institutions of higher education.
21        Section 15.  Definitions.  As used in  this  Act,  except
22    where  the  context clearly requires otherwise, the following
23    terms shall have meanings ascribed to them in this Section:
24             (1)  "Advance  tuition  payment  contract"  means  a
25        contract entered  into  by  the  trust  and  a  purchaser
26        pursuant  to this Act to provide for the higher education
27        of a qualified beneficiary.
28             (2)  "Board" means the Board  of  Directors  of  the
29        Illinois  State Ensured College and University Responsive
30        Education Trust created by this Act.
31             (3)  "Fund" means the Advance Tuition  Payment  Fund
32        created in Section 40.
33             (4)  "Purchaser"  means  a  person  who  makes or is
                            -3-                LRB9001905THpk
 1        obligated to make advance tuition payments pursuant to an
 2        advance tuition payment contract.
 3             (5)  "Qualified beneficiary" means any person who is
 4        a resident of this State at the time that such person  is
 5        designated  as  the  person  whose  tuition  may  be paid
 6        pursuant to an advance tuition payment contract.
 7             (6)  "State institution of higher  education"  means
 8        Chicago  State  University,  Eastern Illinois University,
 9        Governors State University,  Illinois  State  University,
10        Northeastern   Illinois   University,  Northern  Illinois
11        University, Southern Illinois University, the  University
12        of  Illinois,  Western  Illinois  University,  the public
13        community colleges of the State,  and  any  other  public
14        universities,  colleges  and  community  colleges  now or
15        hereafter  established  or  authorized  by  the   General
16        Assembly.
17             (7)  "Trust"   means   the  Illinois  State  Ensured
18        College and University Responsive Education Trust created
19        in Section 20.
20             (8)  "Prevailing average tuition  costs"  means  the
21        result  obtained when the total tuition cost of all State
22        institutions of higher education is divided by the  total
23        number of all full-time equivalent students at all of the
24        State institutions of higher education.
25        Section   20.  Illinois   State   Ensured   College   and
26    University Responsive Education Trust.
27        (a)  There is created a public body corporate and politic
28    to be  known  as  the  Illinois  State  Ensured  College  and
29    University  Responsive  Education  Trust.  The trust shall be
30    within the Office of the State Treasurer, but shall  exercise
31    its   prescribed  statutory  powers,  duties,  and  functions
32    independently of the State Treasurer.
33        (b)  The powers and duties of the Illinois State  Ensured
                            -4-                LRB9001905THpk
 1    College  and University Responsive Education Trust are vested
 2    in and shall be exercised by a board of directors established
 3    as provided in Section 45.
 4        Section 25.  Terms of advance tuition payment contracts.
 5        (a)  The trust, on behalf of itself and  the  State,  may
 6    contract  with  a  purchaser  who  has been made aware of the
 7    provisions contained in  Section  90  of  this  Act  for  the
 8    advance  payment of tuition, by the purchaser for a qualified
 9    beneficiary, to attend  any  of  the  State  institutions  of
10    higher  education  to  which  the  qualified  beneficiary  is
11    admitted,  without  further  tuition  cost  to  the qualified
12    beneficiary.   In  addition,  an  advance   tuition   payment
13    contract shall set forth all of the following:
14             (1)  The  amount of the payment or payments required
15        from  the  purchaser   on   behalf   of   the   qualified
16        beneficiary.
17             (2)  The   terms   and  conditions  for  making  the
18        payment, including, but not limited to, the date or dates
19        upon which the payment, or portions of the payment, shall
20        be due.
21             (3)  Provisions for late  payment  charges  and  for
22        default.
23             (4)  The  name  and age of the qualified beneficiary
24        under the contract, provided that the purchaser, with the
25        approval of and on conditions determined  by  the  trust,
26        may subsequently substitute another qualified beneficiary
27        for the qualified beneficiary originally named.
28             (5)  The  number  of  credit  hours  for  which  the
29        qualified beneficiary may have his or her tuition paid by
30        the  trust pursuant to the contract, subject to the terms
31        of this Section.
32             (6)  The name of the person  entitled  to  terminate
33        the  contract, which, as provided by the contract, may be
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 1        the purchaser, the qualified beneficiary, a person to act
 2        on behalf of the purchaser or qualified  beneficiary,  or
 3        any combination of these persons.
 4             (7)  The   terms  and  conditions  under  which  the
 5        contract may be terminated and the amount of the  refund,
 6        if  any, to which the person terminating the contract, or
 7        specifically  the  purchaser  or   designated   qualified
 8        beneficiary   if  the  contract  so  provides,  shall  be
 9        entitled upon termination.
10             (8)  The assumption of a contractual  obligation  by
11        the  trust to the qualified beneficiary on its own behalf
12        and on behalf of the State  to  pay  tuition  for  credit
13        hours of higher education, not to exceed the credit hours
14        required  for  the granting of a baccalaureate degree, at
15        any State institution of higher education  to  which  the
16        qualified  beneficiary  is admitted.  Notwithstanding any
17        other provision of this Act to the contrary,  if  at  the
18        time or times when tuition payments are due the qualified
19        beneficiary  is  not  entitled to in-State tuition rates,
20        the trust's contractual obligation shall  be  limited  to
21        the payment of that portion of such tuition payment as is
22        equal  to the tuition payment that would have been due if
23        the  qualified  beneficiary  were  entitled  to  in-State
24        tuition rates.
25             (9)  The period of time from the  beginning  to  the
26        end  of  which  the qualified beneficiary may receive the
27        benefits under the contract.
28             (10)  Other terms, conditions, and  provisions  that
29        the trust, in its sole discretion, considers necessary or
30        appropriate.
31        (b)  The  form of any advance tuition payment contract to
32    be entered into by the trust shall first be approved  by  the
33    State Treasurer.
34        (c)  The  trust  shall  make  any  arrangements  that are
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 1    necessary or appropriate with State  institutions  of  higher
 2    education  in  order to fulfill its obligations under advance
 3    tuition payment contracts, which  arrangements  may  include,
 4    but  need  not be limited to, the payment by the trust of the
 5    then actual in-State tuition cost on behalf  of  a  qualified
 6    beneficiary to the State institution of higher education.
 7        (d)  An  advance  tuition  payment contract shall provide
 8    (i) that the trust pay tuition for the qualified  beneficiary
 9    to  attend  a  public  community college of this State before
10    entering a State  institution  of  higher  education  if  the
11    beneficiary  so  chooses,  and  (ii) that the contract may be
12    terminated  pursuant  to  Section  35  after  completing  the
13    requirements for a degree at the public community college  of
14    this State or before entering the State institution of higher
15    education.
16        (e)  An advance tuition payment contract may provide that
17    if  after  a  number  of  years specified in the contract the
18    contract  has  not   been   terminated   or   the   qualified
19    beneficiary's   rights  under  the  contract  have  not  been
20    exercised, the  trust  shall  retain  the  amounts  otherwise
21    payable  and  the  rights  of  the qualified beneficiary, the
22    purchaser,  or  the  agent  of  either  shall  be  considered
23    terminated.
24        (f)  An advance tuition payment contract may provide that
25    the trust shall pay to the qualified beneficiary, before  the
26    commencement of each academic semester or equivalent academic
27    unit, an amount equal to 10% of the tuition paid by the trust
28    on  behalf  of  the  qualified  beneficiary for such academic
29    semester or equivalent academic unit, to be used  for  school
30    books and school supplies.
31        Section  30.  Types of advance tuition payment contracts;
32    additional contract terms.
33        (a)  In addition to other contracts which the  trust  may
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 1    offer,  the  trust  shall  offer contracts of the 2 types set
 2    forth in subsections (b) and (c), to be known as Plan  A  and
 3    Plan B, respectively.
 4        (b)  Under Plan A:
 5             (1)  A  payment  or  series  of  payments  shall  be
 6        required  from  the  purchaser  on  behalf of a qualified
 7        beneficiary.
 8             (2)  The face amount of the payment or payments  may
 9        be refunded by the trust upon termination of the contract
10        pursuant  to  Section 35 and in accordance with the terms
11        of the contract, less any administrative fee specified in
12        the contract, but any investment income  attributable  to
13        the payments shall not be refundable.
14             (3)  The  trust  shall pay tuition for the qualified
15        beneficiary to  attend  a  State  institution  of  higher
16        education  for the number of credit hours required by the
17        institution which the qualified beneficiary  attends  for
18        the  awarding  of a baccalaureate degree, without further
19        tuition cost to  the  qualified  beneficiary,  except  as
20        provided  in subsection (a) of Section 25 for a qualified
21        beneficiary who  is  not  entitled  to  in-State  tuition
22        rates.
23        (c)  Under Plan B:
24             (1)  A  payment  or  series  of  payments  shall  be
25        required  from  the  purchaser  on  behalf of a qualified
26        beneficiary.
27             (2)  The face amount of the payment or payments  may
28        be refunded by the trust upon termination of the contract
29        pursuant  to  Section 35 and in accordance with the terms
30        of contract, less any administrative fee specified in the
31        contract, together with all or  a  specified  portion  of
32        accrued  investment income attributable to the payment or
33        payments as may be agreed to in the contract.
34             (3)  The trust shall pay tuition for  the  qualified
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 1        beneficiary  to  attend  a  State  institution  of higher
 2        education for the number of credit hours required by  the
 3        institution  which  the qualified beneficiary attends for
 4        the awarding of a baccalaureate degree,  without  further
 5        tuition  cost  to  the  qualified  beneficiary, except as
 6        provided in subsection (a) of Section 25 for a  qualified
 7        beneficiary  who  is  not  entitled  to  in-State tuition
 8        rates.
 9        (d)  Contracts required to be offered by this Section may
10    require that payment or payments from a purchaser, on  behalf
11    of a qualified beneficiary who may attend a State institution
12    of  higher  education in less than 4 years after the date the
13    contract is entered into by  the  purchaser,  be  based  upon
14    attendance at a certain State institution of higher education
15    or  at  that  State  institution of higher education with the
16    highest prevailing tuition cost  for  the  number  of  credit
17    hours covered by the contract.
18        Section   35.  Termination  of  advance  payment  tuition
19    contract; limitation; refund.
20        (a)  An  advance  tuition  payment  contract  shall   not
21    authorize  termination of the contract except when one of the
22    following occurs:
23             (1)  The qualified beneficiary dies.
24             (2)  The qualified beneficiary is not admitted to  a
25             State  institution  of higher education after making
26             proper application.
27             (3)  The  qualified  beneficiary  certifies  to  the
28        trust, after attaining the age of majority,  that  he  or
29        she  has  decided  not  to  attend a State institution of
30        higher education  and  requests,  in  writing,  that  the
31        advance tuition payment contract be terminated.
32             (4)  Any  circumstance,  determined by the trust and
33        set forth in the advance tuition payment contract.
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 1        (b)  An advance tuition payment contract may provide  for
 2    a  refund  pursuant  to  this Section to a person to whom the
 3    refund is payable under the contract upon termination of  the
 4    contract.   The  refund  may  include all or a portion of the
 5    payment or payments made by the purchaser under the  contract
 6    and  all  or  a  portion  of  the  accrued  investment income
 7    attributable to the payment or payments.  However, the amount
 8    of a refund shall not exceed the prevailing  average  tuition
 9    cost  on  the date of termination for credit hours covered by
10    the contract at the State institution  of  higher  education.
11    The  amount  of a refund shall be reduced by all amounts paid
12    by the trust to a public community college of this  State  on
13    behalf  of  a  qualified  beneficiary  when  the  contract is
14    terminated as provided in  subsection (d) of Section  25  and
15    by  all  amounts  paid by the trust to a State institution of
16    higher  education  on  behalf  of  a  qualified  beneficiary.
17    Termination of a contract and the right to receive  a  refund
18    shall  not  be authorized under the contract if the qualified
19    beneficiary has completed more than 50% of the  credit  hours
20    required by the State institution of higher education for the
21    awarding  of a baccalaureate degree.  However, this provision
22    shall not affect the  termination  and  refund  rights  of  a
23    graduate of a public community college of this State.
24        (c)  An  advance tuition payment contract may authorize a
25    person, who is entitled under  the  advance  tuition  payment
26    contract  to terminate the contract, to direct payment of the
27    refund  to  an   independent   degree-granting   college   or
28    university  in this State or to a community or junior college
29    in this State.  If directed to make payments pursuant to this
30    subsection,  the  trust  shall  transfer  to  the  designated
31    institution in appropriate installments per academic semester
32    or equivalent academic unit an amount equal  to  the  tuition
33    due  for  the  qualified beneficiary per academic semester or
34    equivalent academic unit, but the trust shall not transfer  a
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 1    cumulative amount greater than the refund to which the person
 2    is  entitled.   If  the  refund  exceeds  the total amount of
 3    transfers directed to the designated institution, the  excess
 4    shall  be  returned  to  the  person  to  whom  the refund is
 5    otherwise payable.
 6        (d)  The amount of a refund paid upon termination of  the
 7    advance  tuition payment contract by a person who directs the
 8    trust pursuant to subsection (c) of this Section to  transfer
 9    the  refund  to  an  independent  degree-granting  college or
10    university located in this State shall not  be  greater  than
11    the  prevailing average tuition cost of State institutions of
12    higher education for the number of credit  hours  covered  by
13    the contract on the date of termination.
14        Section 40.  Advance Tuition Payment Fund.
15        (a)  There  is  created outside of the State treasury and
16    under the jurisdiction and control of the  board  an  Advance
17    Tuition  Payment  Fund.   Payments received by the trust from
18    purchasers on behalf of qualified beneficiaries or  from  any
19    other source, public or private, shall be placed in the fund.
20    The fund may be divided into separate accounts.
21        (b)  Assets  of  the  trust shall not be considered State
22    money, common cash of the State, or  revenue  of  the  State,
23    except  for  purposes  of carrying out the provisions of this
24    Act.
25        (c)  Unless  otherwise  provided  by  resolution  of  the
26    board, assets of the trust shall be expended in the following
27    order of priority:
28             (1)  To  make  payments  to  State  institutions  of
29        higher education on behalf of qualified beneficiaries.
30             (2)  To make refunds  upon  termination  of  advance
31        tuition payment contracts.
32             (3)  To   pay   the   costs  of  administration  and
33        organization of the trust and the fund.
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 1        (d)  Assets  of  the  trust  may  be  invested   in   any
 2    instrument,  obligation,  security,  or  property  considered
 3    appropriate  by  the  trust  and may be pooled for investment
 4    purposes with investments of the State,  including,  but  not
 5    limited to, State pension funds, on such terms and conditions
 6    as are agreeable to the trust.
 7        Section 45.  Board of Directors.
 8        (a)  The Board of Directors of the Illinois State Ensured
 9    College  and  University  Responsive  Education  Trust  shall
10    consist  of  the State Treasurer, the State Comptroller and 5
11    other members who possess knowledge, skill, and experience in
12    the academic, business, or financial field and who  shall  be
13    appointed by the Governor, by and with the advice and consent
14    of  the  Senate,  provided that each such field shall have at
15    least  one  member  chosen  exclusively  for   his   or   her
16    credentials  in  such  field.    Not  more  than  2  of the 5
17    appointed members of the board shall be, during their term of
18    office  on  the  board,  either  officials,  appointees,   or
19    employees  of  this  State. Of the members first appointed, 2
20    shall be appointed for a term that expires December 31, 2000,
21    and 3 shall be appointed for a term that expires December 31,
22    2001.  Upon completion  of  each  term,  a  member  shall  be
23    appointed  for a term of 3 years.  A member shall serve until
24    a successor is appointed and qualified, and any vacancy shall
25    be filled for the balance of the unexpired term  and  in  the
26    same manner as the original appointment.  The chief executive
27    officer  or  director  of  any  State  department,  who  is a
28    designated member of  or  an  appointee  to  the  board,  may
29    appoint  a deputy to serve as a voting member of the board in
30    the absence of the chief executive officer or director.   The
31    Governor  shall designate one member of the board to serve as
32    its chairperson.  The board shall appoint  a  president,  who
33    shall be the chief executive officer, and a vice-president of
                            -12-               LRB9001905THpk
 1    the trust, neither of whom shall be members of the board.
 2        No  member  of  the  board shall have any interest in any
 3    brokerage fee, commission, or other profit  or  gain  arising
 4    out of any investment made by the board.  This paragraph does
 5    not  preclude  ownership  by any board member of any minority
 6    interest in any common stock or any corporate  obligation  in
 7    which investment is made by the board.
 8        (b)  Members   of   the   board   shall   serve   without
 9    compensation,  but shall receive reasonable reimbursement for
10    actual and necessary expenses.
11        (c)  The   board   may   delegate   to   its   president,
12    vice-president, or others such functions and authority as the
13    board considers necessary or  appropriate.   These  functions
14    may  include,  but  are  not  limited  to,  the oversight and
15    supervision of employees of the trust.
16        (d)  A majority of the members of the board serving shall
17    constitute a quorum for the  transaction  of  business  at  a
18    meeting  of the board, or the exercise of a power or function
19    of the trust, notwithstanding the existence of  one  or  more
20    vacancies.   Voting  upon  action taken by the board shall be
21    conducted by majority vote of  the  members  serving  on  the
22    board, and, if authorized by the bylaws of the board and when
23    a  quorum  is  present  in  person  at the meeting, by use of
24    amplified telephonic equipment.  The board shall meet at  the
25    call of the chair and as may be provided in the bylaws of the
26    trust.  Meetings of the board may be held anywhere within the
27    State.
28        (e)  The  business  which  the board may perform shall be
29    conducted at a public meeting of the board held in compliance
30    with the Open Meetings Act.  Public notice of the time, date,
31    and place of  the  meeting  shall  be  given  in  the  manner
32    required by Section 2.02 of the Open Meetings Act.
33        (f)  Any writing prepared, owned, used, in the possession
34    of,  or  retained  by  the  board  in  the  performance of an
                            -13-               LRB9001905THpk
 1    official function and which is a public record shall be  made
 2    available  to  the  public  in compliance with the Freedom of
 3    Information Act.
 4        Section 50.  Powers of Board of Directors.   In  addition
 5    to  the  powers  granted by other provisions of this Act, the
 6    board shall have the powers necessary or convenient to  carry
 7    out  and  effectuate the purposes, objectives, and provisions
 8    of this Act, the purposes and objectives of  the  trust,  and
 9    the  powers  delegated  by  other  laws  or executive orders,
10    including, but not limited to, the power to:
11             (1)  Except as provided in Section  55,  invest  any
12        money  of  the  trust,  at the board's discretion, in any
13        instruments,   obligations,   securities,   or   property
14        determined  proper  by  the  board,  and  name  and   use
15        depositories for its money.
16             (2)  Pay  money  to  State  institutions  of  higher
17        education from the trust.
18             (3)  Impose  reasonable  residency  requirements for
19        qualified beneficiaries.
20             (4)  Impose  reasonable  limits  on  the  number  of
21        participants in the trust, provided that if the number of
22        applicants exceed those limits the participants shall  be
23        chosen by a lottery system, and preference shall be given
24        to  those  who  have unsuccessfully applied in a previous
25        selection process.
26             (5)  Segregate contributions  and  payments  to  the
27        trust into various accounts and funds.
28             (6)  Contract  for  goods  and  services  and engage
29        personnel as is necessary  and  engage  the  services  of
30        private  consultants, actuaries, managers, legal counsel,
31        and auditors for rendering professional, managerial,  and
32        technical assistance and advice, payable out of any money
33        of the trust.
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 1             (7)  Solicit  and  accept  gifts, grants, loans, and
 2        other aids from any person or the federal,  State,  or  a
 3        local  government or any agency of the federal, State, or
 4        a local government, or to participate in any other way in
 5        any federal, State, or local government program.
 6             (8)  Charge, impose, and collect administrative fees
 7        and  charges  in  connection  with  any  transaction  and
 8        provide  for  reasonable   civil   penalties,   including
 9        default, for delinquent payment of fees or charges or for
10        fraud.
11             (9)  Procure   insurance   against   any   loss   in
12        connection   with   the   trust's   property,  assets  or
13        activities.
14             (10)  Sue and be sued; to have a seal and alter  the
15        same  at pleasure; to have perpetual succession; to make,
16        execute, and deliver contracts,  conveyances,  and  other
17        instruments  necessary  or  convenient to the exercise of
18        its powers; and to make and amend bylaws.
19             (11)  Enter  into  contracts  which  relate  to  the
20        purposes of this Act on behalf of the State.
21             (12)  Administer the funds of the trust.
22             (13)  Indemnify or  procure  insurance  indemnifying
23        any   member   of   the   board  from  personal  loss  or
24        accountability from liability resulting from  a  member's
25        good  faith  action or inaction as a member of the board,
26        including, but not limited to, liability  asserted  by  a
27        person on any bonds or notes of the trust.
28             (14)  Impose  reasonable  time  limits on use of the
29        tuition benefits provided by the trust, if the limits are
30        made a part of the contract.
31             (15)  Define the terms and  conditions  under  which
32        money may be withdrawn from the trust, including, but not
33        limited  to,  reasonable  charges  and  fees for any such
34        withdrawal, if the terms and conditions are made  a  part
                            -15-               LRB9001905THpk
 1        of the contract.
 2             (16)  Provide   for   receiving   contributions  and
 3        payments in lump sums or periodic sums.
 4             (17)  Establish    policies,     procedures,     and
 5        eligibility criteria to implement this Act.
 6        Section 55.  Prohibited Transactions.
 7        (a)  A  fiduciary  with  respect to the trust or the fund
 8    shall not cause the trust or fund to engage in a  transaction
 9    if  he  or  she  knows  or  should know that such transaction
10    constitutes a direct or indirect:
11             (1)  Sale or exchange, or leasing  of  any  property
12        from  the  trust  or fund to a party in interest for less
13        than adequate consideration, or from a party in  interest
14        to   the   trust   or   fund   for   more  than  adequate
15        consideration;
16             (2)  Lending of money or other extension  of  credit
17        from the trust or fund to a party in interest without the
18        receipt  of  adequate  security  and a reasonable rate of
19        interest, or from a party in interest  to  the  trust  or
20        fund  with  the  provision  of  excessive  security or an
21        unreasonably high rate of interest;
22             (3)  Furnishing of  goods,  services  or  facilities
23        from  the  trust  or fund to a party in interest for less
24        than adequate consideration, or from a party in  interest
25        to   the   trust   or   fund   for   more  than  adequate
26        consideration; or
27             (4)  Transfer to, or use by or for the benefit of, a
28        party in interest of any assets of the trust or fund  for
29        less than adequate consideration.
30        (b)  A  fiduciary  with  respect  to  the  trust  or fund
31    established under this Act shall not:
32             (1)  Deal with the assets of the trust  or  fund  in
33        his own interest or for his own account;
                            -16-               LRB9001905THpk
 1             (2)  In  his individual or any other capacity act in
 2        any transaction involving the trust or fund on behalf  of
 3        a  party whose interests  are adverse to the interests of
 4        the trust or fund or the interests of its participants or
 5        beneficiaries; or
 6             (3)  Receive any consideration for his own  personal
 7        account  from any party dealing with the trust or fund in
 8        connection with a transaction involving the assets of the
 9        trust or fund.
10        (c)  Nothing  in  this  Section  shall  be  construed  to
11    prohibit any member of the board from:
12             (1)  Receiving any benefit to which he or she may be
13        entitled as a participant or qualified beneficiary in the
14        trust or fund;
15             (2)  Receiving   any   reimbursement   of   expenses
16        properly and actually incurred in the performance of  his
17        duties with the trust or fund; or
18             (3)  Serving as a member of the board in addition to
19        being an officer, employee, agent or other representative
20        of a party in interest.
21        Section   60.  Accounting  and  audit.  The  board  shall
22    annually prepare or cause to be prepared an accounting of the
23    trust and shall transmit a copy  of  the  accounting  to  the
24    Governor,  the  President  of  the Senate, the Speaker of the
25    House of Representatives, and the respective minority leaders
26    of the Senate and House of Representatives.  The board  shall
27    also  make  available  the  accounting  of  the  trust to the
28    purchasers of the trust.  The accounts of the board shall  be
29    subject  to  annual  audits by the State Auditor General or a
30    certified public accountant appointed by the Auditor General.
31        Section 65.  Trust administration.
32        (a)  The  trust  shall  be  administered  in   a   manner
                            -17-               LRB9001905THpk
 1    reasonably  designed  to  be  actuarially  sound  so that the
 2    assets  of  the  trust  will  be  sufficient  to  defray  the
 3    obligations of the trust.
 4        (b)  In the accounting of  the  trust  made  pursuant  to
 5    Section  60, the board shall annually evaluate or cause to be
 6    evaluated the actuarial soundness of the trust and  determine
 7    the   additional   assets  needed,  if  any,  to  defray  the
 8    obligations of the trust.  If there are not funds  sufficient
 9    to  ensure  the  actuarial  soundness of the trust, the trust
10    shall adjust payments of subsequent purchases to  ensure  its
11    actuarial soundness.
12        (c)  Before  the  trust  may  enter  into advance tuition
13    payment contracts with purchasers, the  State  Department  of
14    Revenue   shall   have  solicited  and  received  answers  to
15    appropriate ruling requests from the Internal Revenue Service
16    regarding the tax status of  the  value  received  under  the
17    contract  to  the  purchaser  or  qualified  beneficiary. The
18    Department of Revenue shall promptly furnish any  information
19    relating  to  the  request  to the board. No contracts may be
20    entered into without the board providing, in writing, to  any
21    prospective purchaser, the status of the request.
22        (d)  Before   entering   into   advance  tuition  payment
23    contracts with purchasers, the State shall solicit answers to
24    appropriate ruling requests from the Securities and  Exchange
25    Commission regarding the application of federal security laws
26    to  the  trust.   No  contracts  shall be entered without the
27    board making known the status of the request.
28        Section 70.  Enforcement.  State institutions  of  higher
29    education,   purchasers,   and  qualified  beneficiaries  may
30    enforce this Act and any contract entered  into  pursuant  to
31    this Act in the circuit court of Sangamon County.
32        Section  75.  Trust  property  and income; exemption from
                            -18-               LRB9001905THpk
 1    State taxation. The property of the trust and its income  and
 2    operation  shall be exempt from all taxation by this State or
 3    any of its political subdivisions.
 4        Section  80.  Other  contracts;  related  programs.   The
 5    trust, in its discretion, may contract with others, public or
 6    private,  for  the  provision  of  all  or  a  portion of the
 7    services necessary for the management and  operation  of  the
 8    trust.   The  trust shall also endeavor to work  with private
 9    sector investment managers  and  independent  degree-granting
10    colleges   and  universities  in  this  State  to  study  the
11    feasibility of instituting  programs  between  these  parties
12    that   insure   full  tuition  payment  upon  purchase  of  a
13    prepayment plan with the private college or university.
14        Section 85.  Use of trust assets. The assets of the trust
15    shall be preserved, invested, and expended solely pursuant to
16    and for the purposes set forth in this Act and shall  not  be
17    loaned  or otherwise transferred or used by the State for any
18    purpose other than the purposes of this  Act.   This  Section
19    shall  not  be construed to prohibit the trust from investing
20    in,  by  purchase  or  otherwise,  bonds,  notes,  or   other
21    obligations  of  the  State,  an  agency  of the State, or an
22    instrumentality of the State.
23        Section 90.  Limitation.  Nothing in this Act  or  in  an
24    advance  tuition  payment  contract  entered into pursuant to
25    this Act shall be construed as a promise or guarantee by  the
26    trust  or the State that a person will be admitted to a State
27    institution of higher education  or  to  a  particular  State
28    institution  of higher education; will be allowed to continue
29    to attend a  State  institution  of  higher  education  after
30    having  been  admitted;  or  will  be  graduated from a State
31    institution of higher education.
                            -19-               LRB9001905THpk
 1        Section 95.  Securities  exemption.  An  advance  tuition
 2    payment  contract  shall  be exempt from the provision of the
 3    Illinois Securities Law of 1953. An advance  tuition  payment
 4    contract  may  not  be  sold  or otherwise transferred by the
 5    purchaser or qualified beneficiary without the prior approval
 6    of the trust.
 7        Section 100.  Income tax deduction. Pursuant  to  Section
 8    203  of the Illinois Income Tax Act, the purchaser may deduct
 9    the amount of an advance tuition payment from taxable  income
10    in  the tax year in which the payment is made, but any refund
11    pursuant to Section 35 shall be taxable to the  recipient  in
12    the taxable year in which the refund is received.
13        Section  105.  Construction of Act. This Act (i) shall be
14    construed liberally to effectuate legislative intent and  the
15    purposes  of  the  Act,  and  (ii)  constitutes  complete and
16    independent authority for the performance of each  and  every
17    act  and  thing authorized in the Act.  All powers granted in
18    this Act shall be  broadly  interpreted  to  effectuate  such
19    intent and purposes and not as a limitation of powers.
20        Section  500.  The  Illinois Income Tax Act is amended by
21    changing Section 203 as follows:
22        (35 ILCS 5/203) (from Ch. 120, par. 2-203)
23        Sec. 203.  Base income defined.
24        (a)  Individuals.
25             (1)  In general.  In the case of an individual, base
26        income means an amount equal to the  taxpayer's  adjusted
27        gross   income  for  the  taxable  year  as  modified  by
28        paragraph (2).
29             (2)  Modifications.   The  adjusted   gross   income
30        referred  to in paragraph (1) shall be modified by adding
                            -20-               LRB9001905THpk
 1        thereto the sum of the following amounts:
 2                  (A)  An amount equal to  all  amounts  paid  or
 3             accrued  to  the  taxpayer  as interest or dividends
 4             during the taxable year to the extent excluded  from
 5             gross  income  in  the computation of adjusted gross
 6             income, except stock dividends of  qualified  public
 7             utilities   described   in  Section  305(e)  of  the
 8             Internal Revenue Code;
 9                  (B)  An amount  equal  to  the  amount  of  tax
10             imposed  by  this  Act  to  the extent deducted from
11             gross income in the computation  of  adjusted  gross
12             income for the taxable year;
13                  (C)  An  amount  equal  to  the amount received
14             during the taxable year as a recovery or  refund  of
15             real   property  taxes  paid  with  respect  to  the
16             taxpayer's principal residence under the Revenue Act
17             of 1939 and for which  a  deduction  was  previously
18             taken  under  subparagraph (L) of this paragraph (2)
19             prior to July 1, 1991, the retrospective application
20             date of Article 4 of Public Act 87-17.  In the  case
21             of  multi-unit  or  multi-use  structures  and  farm
22             dwellings,  the  taxes  on  the taxpayer's principal
23             residence shall be that portion of the  total  taxes
24             for  the  entire  property  which is attributable to
25             such principal residence;
26                  (D)  An amount  equal  to  the  amount  of  the
27             capital  gain deduction allowable under the Internal
28             Revenue Code, to  the  extent  deducted  from  gross
29             income  in the computation of adjusted gross income;
30             and
31                  (D-5)  An amount, to the extent not included in
32             adjusted gross income, equal to the amount of  money
33             withdrawn by the taxpayer in the taxable year from a
34             medical care savings account and the interest earned
                            -21-               LRB9001905THpk
 1             on  the  account in the taxable year of a withdrawal
 2             pursuant to subsection (b)  of  Section  20  of  the
 3             Medical Care Savings Account Act;
 4        and  by  deducting  from the total so obtained the sum of
 5        the following amounts:
 6                  (E)  Any  amount  included  in  such  total  in
 7             respect  of  any  compensation  (including  but  not
 8             limited to any compensation paid  or  accrued  to  a
 9             serviceman  while  a  prisoner  of war or missing in
10             action) paid to a resident by  reason  of  being  on
11             active duty in the Armed Forces of the United States
12             and  in  respect of any compensation paid or accrued
13             to a resident who as a governmental employee  was  a
14             prisoner of war or missing in action, and in respect
15             of  any  compensation  paid to a resident in 1971 or
16             thereafter for annual training performed pursuant to
17             Sections 502 and 503, Title 32, United  States  Code
18             as a member of the Illinois National Guard;
19                  (F)  An amount equal to all amounts included in
20             such  total  pursuant  to the provisions of Sections
21             402(a), 402(c), 403(a), 403(b), 406(a), 407(a),  and
22             408  of  the  Internal  Revenue Code, or included in
23             such total as distributions under the provisions  of
24             any  retirement  or disability plan for employees of
25             any  governmental  agency  or  unit,  or  retirement
26             payments to retired  partners,  which  payments  are
27             excluded   in   computing  net  earnings  from  self
28             employment by Section 1402 of the  Internal  Revenue
29             Code and regulations adopted pursuant thereto;
30                  (G)  The valuation limitation amount;
31                  (H)  An  amount  equal to the amount of any tax
32             imposed by  this  Act  which  was  refunded  to  the
33             taxpayer  and included in such total for the taxable
34             year;
                            -22-               LRB9001905THpk
 1                  (I)  An amount equal to all amounts included in
 2             such total pursuant to the provisions of Section 111
 3             of the Internal Revenue Code as a recovery of  items
 4             previously  deducted  from  adjusted gross income in
 5             the computation of taxable income;
 6                  (J)  An  amount  equal   to   those   dividends
 7             included   in  such  total  which  were  paid  by  a
 8             corporation which conducts business operations in an
 9             Enterprise Zone or zones created under the  Illinois
10             Enterprise  Zone Act, and conducts substantially all
11             of its operations in an Enterprise Zone or zones;
12                  (K)  An  amount  equal   to   those   dividends
13             included   in   such  total  that  were  paid  by  a
14             corporation that conducts business operations  in  a
15             federally  designated Foreign Trade Zone or Sub-Zone
16             and  that  is  designated  a  High  Impact  Business
17             located  in  Illinois;   provided   that   dividends
18             eligible  for the deduction provided in subparagraph
19             (J) of paragraph (2) of this subsection shall not be
20             eligible  for  the  deduction  provided  under  this
21             subparagraph (K);
22                  (L)  For taxable years  ending  after  December
23             31,  1983,  an  amount  equal to all social security
24             benefits and railroad retirement  benefits  included
25             in  such  total pursuant to Sections 72(r) and 86 of
26             the Internal Revenue Code;
27                  (M)  With  the   exception   of   any   amounts
28             subtracted  under  subparagraph (N), an amount equal
29             to the sum of all amounts disallowed  as  deductions
30             by  Sections  171(a) (2), and 265(2) of the Internal
31             Revenue Code of 1954, as now or  hereafter  amended,
32             and  all  amounts  of expenses allocable to interest
33             and  disallowed as deductions by Section  265(1)  of
34             the  Internal  Revenue  Code  of  1954,  as  now  or
                            -23-               LRB9001905THpk
 1             hereafter amended;
 2                  (N)  An amount equal to all amounts included in
 3             such  total  which  are exempt from taxation by this
 4             State  either  by  reason   of   its   statutes   or
 5             Constitution  or  by  reason  of  the  Constitution,
 6             treaties  or statutes of the United States; provided
 7             that, in the case of any statute of this State  that
 8             exempts   income   derived   from   bonds  or  other
 9             obligations from the tax imposed under this Act, the
10             amount exempted shall be the interest  net  of  bond
11             premium amortization;
12                  (O)  An  amount  equal to any contribution made
13             to a job training project  established  pursuant  to
14             the Tax Increment Allocation Redevelopment Act;
15                  (P)  An  amount  equal  to  the  amount  of the
16             deduction used to compute  the  federal  income  tax
17             credit  for  restoration of substantial amounts held
18             under claim of right for the taxable  year  pursuant
19             to  Section  1341  of  the  Internal Revenue Code of
20             1986;
21                  (Q)  An amount equal to any amounts included in
22             such  total,  received  by  the   taxpayer   as   an
23             acceleration  in  the  payment of life, endowment or
24             annuity benefits in advance of the time  they  would
25             otherwise  be payable as an indemnity for a terminal
26             illness;
27                  (R)  An amount  equal  to  the  amount  of  any
28             federal  or  State  bonus  paid  to  veterans of the
29             Persian Gulf War;
30                  (S)  An  amount,  to  the  extent  included  in
31             adjusted gross income, equal  to  the  amount  of  a
32             contribution  made  in the taxable year on behalf of
33             the taxpayer  to  a  medical  care  savings  account
34             established  under  the Medical Care Savings Account
                            -24-               LRB9001905THpk
 1             Act to the extent the contribution  is  accepted  by
 2             the account administrator as provided in that Act;
 3                  (T)  An  amount,  to  the  extent  included  in
 4             adjusted  gross  income,  equal  to  the  amount  of
 5             interest  earned  in  the  taxable year on a medical
 6             care savings account established under  the  Medical
 7             Care  Savings Account Act on behalf of the taxpayer,
 8             other than interest added pursuant to item (D-5)  of
 9             this paragraph (2);
10                  (U)  For one taxable year beginning on or after
11             January 1, 1994, an amount equal to the total amount
12             of  tax  imposed  and paid under subsections (a) and
13             (b) of Section 201 of  this  Act  on  grant  amounts
14             received  by  the  taxpayer  under  the Nursing Home
15             Grant Assistance Act during the  taxpayer's  taxable
16             years 1992 and 1993; and
17                  (V)  Beginning  with  tax  years  ending  on or
18             after December 31, 1995 and ending  with  tax  years
19             ending  on  or  before  December 31, 1999, an amount
20             equal to the amount paid by  a  taxpayer  who  is  a
21             self-employed  taxpayer, a partner of a partnership,
22             or a shareholder in a Subchapter S  corporation  for
23             health  insurance  or  long-term  care insurance for
24             that  taxpayer  or   that   taxpayer's   spouse   or
25             dependents,  to  the extent that the amount paid for
26             that health insurance or  long-term  care  insurance
27             may  be  deducted  under Section 213 of the Internal
28             Revenue Code of 1986, has not been deducted  on  the
29             federal  income tax return of the taxpayer, and does
30             not exceed the taxable income attributable  to  that
31             taxpayer's   income,   self-employment   income,  or
32             Subchapter S  corporation  income;  except  that  no
33             deduction  shall  be  allowed under this item (V) if
34             the taxpayer  is  eligible  to  participate  in  any
                            -25-               LRB9001905THpk
 1             health insurance or long-term care insurance plan of
 2             an  employer  of  the  taxpayer  or  the  taxpayer's
 3             spouse.   The  amount  of  the  health insurance and
 4             long-term care insurance subtracted under this  item
 5             (V)  shall be determined by multiplying total health
 6             insurance and long-term care insurance premiums paid
 7             by the taxpayer times a number that  represents  the
 8             fractional  percentage  of eligible medical expenses
 9             under Section 213 of the Internal  Revenue  Code  of
10             1986 not actually deducted on the taxpayer's federal
11             income tax return; and.
12                  (W)  An  amount  equal  to  any advance tuition
13             payment made pursuant to the Illinois State  Ensured
14             College  and  University  Responsive Education Trust
15             Act.
16        (b)  Corporations.
17             (1)  In general.  In the case of a corporation, base
18        income means an amount equal to  the  taxpayer's  taxable
19        income for the taxable year as modified by paragraph (2).
20             (2)  Modifications.   The taxable income referred to
21        in paragraph (1) shall be modified by adding thereto  the
22        sum of the following amounts:
23                  (A)  An  amount  equal  to  all amounts paid or
24             accrued  to  the  taxpayer  as  interest   and   all
25             distributions  received  from  regulated  investment
26             companies  during  the  taxable  year  to the extent
27             excluded from gross income  in  the  computation  of
28             taxable income;
29                  (B)  An  amount  equal  to  the  amount  of tax
30             imposed by this Act  to  the  extent  deducted  from
31             gross  income  in  the computation of taxable income
32             for the taxable year;
33                  (C)  In the  case  of  a  regulated  investment
34             company  or  real estate investment trust, an amount
                            -26-               LRB9001905THpk
 1             equal to the excess of (i) the net long-term capital
 2             gain for the taxable year, over (ii) the  amount  of
 3             the  capital  gain  dividends  designated as such in
 4             accordance  with  Section  852(b)(3)(C)  or  Section
 5             857(b)(3)(C) of the Internal Revenue  Code  and  any
 6             amount  designated under Section 852(b)(3)(D) of the
 7             Internal Revenue Code, attributable to  the  taxable
 8             year.
 9        This  amendatory  Act  of 1995 is declarative of existing
10    law and is not a new enactment.
11                  (D)  The  amount  of  any  net  operating  loss
12             deduction taken in arriving at taxable income, other
13             than a net operating loss  carried  forward  from  a
14             taxable year ending prior to December 31, 1986; and
15                  (E)  For taxable years in which a net operating
16             loss  carryback  or carryforward from a taxable year
17             ending prior to December 31, 1986 is an  element  of
18             taxable income under paragraph (1) of subsection (e)
19             or  subparagraph  (E) of paragraph (2) of subsection
20             (e), the  amount  by  which  addition  modifications
21             other  than  those provided by this subparagraph (E)
22             exceeded subtraction modifications in  such  earlier
23             taxable year, with the following limitations applied
24             in the order that they are listed:
25                       (i)  the addition modification relating to
26                  the  net operating loss carried back or forward
27                  to the  taxable  year  from  any  taxable  year
28                  ending  prior  to  December  31,  1986 shall be
29                  reduced by the amount of addition  modification
30                  under  this  subparagraph  (E) which related to
31                  that net operating loss  and  which  was  taken
32                  into  account in calculating the base income of
33                  an earlier taxable year, and
34                       (ii)  the addition  modification  relating
                            -27-               LRB9001905THpk
 1                  to  the  net  operating  loss  carried  back or
 2                  forward to the taxable year  from  any  taxable
 3                  year  ending  prior  to December 31, 1986 shall
 4                  not exceed the  amount  of  such  carryback  or
 5                  carryforward;
 6                  For  taxable  years  in  which  there  is a net
 7             operating loss carryback or carryforward  from  more
 8             than one other taxable year ending prior to December
 9             31, 1986, the addition modification provided in this
10             subparagraph  (E)  shall  be  the sum of the amounts
11             computed   independently   under    the    preceding
12             provisions  of  this  subparagraph (E) for each such
13             taxable year,
14        and by deducting from the total so obtained  the  sum  of
15        the following amounts:
16                  (F)  An  amount  equal to the amount of any tax
17             imposed by  this  Act  which  was  refunded  to  the
18             taxpayer  and included in such total for the taxable
19             year;
20                  (G)  An amount equal to any amount included  in
21             such  total under Section 78 of the Internal Revenue
22             Code;
23                  (H)  In the  case  of  a  regulated  investment
24             company,  an  amount  equal  to the amount of exempt
25             interest dividends as defined in subsection (b)  (5)
26             of Section 852 of the Internal Revenue Code, paid to
27             shareholders for the taxable year;
28                  (I)  With   the   exception   of   any  amounts
29             subtracted under subparagraph (J), an  amount  equal
30             to  the  sum of all amounts disallowed as deductions
31             by Sections 171(a) (2), and  265(a)(2)  and  amounts
32             disallowed  as interest expense by Section 291(a)(3)
33             of the Internal Revenue Code, as  now  or  hereafter
34             amended,  and  all  amounts of expenses allocable to
                            -28-               LRB9001905THpk
 1             interest and disallowed  as  deductions  by  Section
 2             265(a)(1)  of  the  Internal Revenue Code, as now or
 3             hereafter amended;
 4                  (J)  An amount equal to all amounts included in
 5             such total which are exempt from  taxation  by  this
 6             State   either   by   reason   of  its  statutes  or
 7             Constitution  or  by  reason  of  the  Constitution,
 8             treaties or statutes of the United States;  provided
 9             that,  in the case of any statute of this State that
10             exempts  income  derived   from   bonds   or   other
11             obligations from the tax imposed under this Act, the
12             amount  exempted  shall  be the interest net of bond
13             premium amortization;
14                  (K)  An  amount  equal   to   those   dividends
15             included   in  such  total  which  were  paid  by  a
16             corporation which conducts business operations in an
17             Enterprise Zone or zones created under the  Illinois
18             Enterprise  Zone  Act and conducts substantially all
19             of its operations in an Enterprise Zone or zones;
20                  (L)  An  amount  equal   to   those   dividends
21             included   in   such  total  that  were  paid  by  a
22             corporation that conducts business operations  in  a
23             federally  designated Foreign Trade Zone or Sub-Zone
24             and  that  is  designated  a  High  Impact  Business
25             located  in  Illinois;   provided   that   dividends
26             eligible  for the deduction provided in subparagraph
27             (K) of paragraph 2 of this subsection shall  not  be
28             eligible  for  the  deduction  provided  under  this
29             subparagraph (L);
30                  (M)  For  any  taxpayer  that  is  a  financial
31             organization within the meaning of Section 304(c) of
32             this  Act,  an  amount  included  in  such  total as
33             interest income from a loan or loans  made  by  such
34             taxpayer  to  a  borrower, to the extent that such a
                            -29-               LRB9001905THpk
 1             loan is secured by property which  is  eligible  for
 2             the  Enterprise Zone Investment Credit. To determine
 3             the portion of a loan or loans that  is  secured  by
 4             property  eligible  for  a Section 201(h) investment
 5             credit to the borrower, the entire principal  amount
 6             of  the  loan  or loans between the taxpayer and the
 7             borrower should be divided into  the  basis  of  the
 8             Section  201(h)  investment  credit  property  which
 9             secures  the  loan  or loans, using for this purpose
10             the original basis of such property on the date that
11             it was placed in service  in  the  Enterprise  Zone.
12             The  subtraction  modification available to taxpayer
13             in any year under  this  subsection  shall  be  that
14             portion  of  the total interest paid by the borrower
15             with  respect  to  such  loan  attributable  to  the
16             eligible property as calculated under  the  previous
17             sentence;
18                  (M-1)  For  any  taxpayer  that  is a financial
19             organization within the meaning of Section 304(c) of
20             this Act,  an  amount  included  in  such  total  as
21             interest  income  from  a loan or loans made by such
22             taxpayer to a borrower, to the extent  that  such  a
23             loan  is  secured  by property which is eligible for
24             the High  Impact  Business  Investment  Credit.   To
25             determine  the  portion  of  a loan or loans that is
26             secured by property eligible for  a  Section  201(i)
27             investment   credit  to  the  borrower,  the  entire
28             principal amount of the loan or  loans  between  the
29             taxpayer and the borrower should be divided into the
30             basis   of  the  Section  201(i)  investment  credit
31             property which secures the loan or loans, using  for
32             this  purpose the original basis of such property on
33             the  date  that  it  was  placed  in  service  in  a
34             federally designated Foreign Trade Zone or  Sub-Zone
                            -30-               LRB9001905THpk
 1             located  in  Illinois.  No taxpayer that is eligible
 2             for the deduction provided in  subparagraph  (M)  of
 3             paragraph  (2)  of this subsection shall be eligible
 4             for the deduction provided under  this  subparagraph
 5             (M-1).   The  subtraction  modification available to
 6             taxpayers in any year under this subsection shall be
 7             that portion of  the  total  interest  paid  by  the
 8             borrower  with  respect to such loan attributable to
 9             the  eligible  property  as  calculated  under   the
10             previous sentence;
11                  (N)  Two times any contribution made during the
12             taxable  year  to  a designated zone organization to
13             the extent that the contribution (i) qualifies as  a
14             charitable  contribution  under  subsection  (c)  of
15             Section  170  of  the Internal Revenue Code and (ii)
16             must, by its terms, be used for a  project  approved
17             by  the Department of Commerce and Community Affairs
18             under Section 11 of  the  Illinois  Enterprise  Zone
19             Act;
20                  (O)  An  amount  equal  to: (i) 85% for taxable
21             years ending on or before December 31, 1992,  or,  a
22             percentage  equal  to the percentage allowable under
23             Section 243(a)(1) of the Internal  Revenue  Code  of
24             1986  for  taxable  years  ending after December 31,
25             1992, of the amount by which dividends  included  in
26             taxable  income and received from a corporation that
27             is not created or organized under the  laws  of  the
28             United  States or any state or political subdivision
29             thereof, including, for taxable years ending  on  or
30             after  December  31,  1988,  dividends  received  or
31             deemed   received  or  paid  or  deemed  paid  under
32             Sections 951 through 964  of  the  Internal  Revenue
33             Code, exceed the amount of the modification provided
34             under  subparagraph  (G)  of  paragraph  (2) of this
                            -31-               LRB9001905THpk
 1             subsection (b) which is related to  such  dividends;
 2             plus  (ii)  100%  of  the amount by which dividends,
 3             included in taxable income and received,  including,
 4             for  taxable  years  ending on or after December 31,
 5             1988, dividends received or deemed received or  paid
 6             or deemed paid under Sections 951 through 964 of the
 7             Internal  Revenue  Code,  from  any such corporation
 8             specified in clause  (i)  that  would  but  for  the
 9             provisions  of  Section 1504 (b) (3) of the Internal
10             Revenue  Code  be  treated  as  a  member   of   the
11             affiliated   group   which   includes  the  dividend
12             recipient, exceed the  amount  of  the  modification
13             provided  under subparagraph (G) of paragraph (2) of
14             this  subsection  (b)  which  is  related  to   such
15             dividends;
16                  (P)  An  amount  equal to any contribution made
17             to a job training project  established  pursuant  to
18             the Tax Increment Allocation Redevelopment Act; and
19                  (Q)  An  amount  equal  to  the  amount  of the
20             deduction used to compute  the  federal  income  tax
21             credit  for  restoration of substantial amounts held
22             under claim of right for the taxable  year  pursuant
23             to  Section  1341  of  the  Internal Revenue Code of
24             1986; and.
25                  (R)  An amount equal  to  any  advance  tuition
26             payment  made pursuant to the Illinois State Ensured
27             College and University  Responsive  Education  Trust
28             Act.
29             (3)  Special  rule.   For  purposes of paragraph (2)
30        (A), "gross income" in  the  case  of  a  life  insurance
31        company,  for  tax years ending on and after December 31,
32        1994, shall mean the  gross  investment  income  for  the
33        taxable year.
34        (c)  Trusts and estates.
                            -32-               LRB9001905THpk
 1             (1)  In  general.  In the case of a trust or estate,
 2        base income means  an  amount  equal  to  the  taxpayer's
 3        taxable  income  for  the  taxable  year  as  modified by
 4        paragraph (2).
 5             (2)  Modifications.  Subject to  the  provisions  of
 6        paragraph   (3),   the  taxable  income  referred  to  in
 7        paragraph (1) shall be modified by adding thereto the sum
 8        of the following amounts:
 9                  (A)  An amount equal to  all  amounts  paid  or
10             accrued  to  the  taxpayer  as interest or dividends
11             during the taxable year to the extent excluded  from
12             gross income in the computation of taxable income;
13                  (B)  In the case of (i) an estate, $600; (ii) a
14             trust  which,  under  its  governing  instrument, is
15             required to distribute all of its income  currently,
16             $300;  and  (iii) any other trust, $100, but in each
17             such case,  only  to  the  extent  such  amount  was
18             deducted in the computation of taxable income;
19                  (C)  An  amount  equal  to  the  amount  of tax
20             imposed by this Act  to  the  extent  deducted  from
21             gross  income  in  the computation of taxable income
22             for the taxable year;
23                  (D)  The  amount  of  any  net  operating  loss
24             deduction taken in arriving at taxable income, other
25             than a net operating loss  carried  forward  from  a
26             taxable year ending prior to December 31, 1986;
27                  (E)  For taxable years in which a net operating
28             loss  carryback  or carryforward from a taxable year
29             ending prior to December 31, 1986 is an  element  of
30             taxable income under paragraph (1) of subsection (e)
31             or  subparagraph  (E) of paragraph (2) of subsection
32             (e), the  amount  by  which  addition  modifications
33             other  than  those provided by this subparagraph (E)
34             exceeded subtraction modifications in  such  taxable
                            -33-               LRB9001905THpk
 1             year,  with the following limitations applied in the
 2             order that they are listed:
 3                       (i)  the addition modification relating to
 4                  the net operating loss carried back or  forward
 5                  to  the  taxable  year  from  any  taxable year
 6                  ending prior to  December  31,  1986  shall  be
 7                  reduced  by the amount of addition modification
 8                  under this subparagraph (E)  which  related  to
 9                  that  net  operating  loss  and which was taken
10                  into account in calculating the base income  of
11                  an earlier taxable year, and
12                       (ii)  the  addition  modification relating
13                  to the  net  operating  loss  carried  back  or
14                  forward  to  the  taxable year from any taxable
15                  year ending prior to December  31,  1986  shall
16                  not  exceed  the  amount  of  such carryback or
17                  carryforward;
18                  For taxable years  in  which  there  is  a  net
19             operating  loss  carryback or carryforward from more
20             than one other taxable year ending prior to December
21             31, 1986, the addition modification provided in this
22             subparagraph (E) shall be the  sum  of  the  amounts
23             computed    independently    under   the   preceding
24             provisions of this subparagraph (E)  for  each  such
25             taxable year;
26                  (F)  For  taxable  years  ending  on  or  after
27             January 1, 1989, an amount equal to the tax deducted
28             pursuant to Section 164 of the Internal Revenue Code
29             if  the trust or estate is claiming the same tax for
30             purposes of the Illinois foreign  tax  credit  under
31             Section 601 of this Act; and
32                  (G)  An  amount  equal  to  the  amount  of the
33             capital gain deduction allowable under the  Internal
34             Revenue  Code,  to  the  extent  deducted from gross
                            -34-               LRB9001905THpk
 1             income in the computation of taxable income;
 2        and by deducting from the total so obtained  the  sum  of
 3        the following amounts:
 4                  (H)  An amount equal to all amounts included in
 5             such  total  pursuant  to the provisions of Sections
 6             402(a), 402(c), 403(a), 403(b), 406(a),  407(a)  and
 7             408 of the Internal Revenue Code or included in such
 8             total  as  distributions under the provisions of any
 9             retirement or disability plan for employees  of  any
10             governmental  agency or unit, or retirement payments
11             to retired partners, which payments are excluded  in
12             computing  net  earnings  from  self  employment  by
13             Section  1402  of  the  Internal  Revenue  Code  and
14             regulations adopted pursuant thereto;
15                  (I)  The valuation limitation amount;
16                  (J)  An  amount  equal to the amount of any tax
17             imposed by  this  Act  which  was  refunded  to  the
18             taxpayer  and included in such total for the taxable
19             year;
20                  (K)  An amount equal to all amounts included in
21             taxable income as  modified  by  subparagraphs  (A),
22             (B),  (C),  (D),  (E),  (F) and (G) which are exempt
23             from taxation by this State either by reason of  its
24             statutes   or  Constitution  or  by  reason  of  the
25             Constitution, treaties or  statutes  of  the  United
26             States; provided that, in the case of any statute of
27             this State that exempts income derived from bonds or
28             other  obligations  from  the tax imposed under this
29             Act, the amount exempted shall be the  interest  net
30             of bond premium amortization;
31                  (L)  With   the   exception   of   any  amounts
32             subtracted under subparagraph (K), an  amount  equal
33             to  the  sum of all amounts disallowed as deductions
34             by Sections 171(a) (2) and 265(a)(2) of the Internal
                            -35-               LRB9001905THpk
 1             Revenue Code, as now or hereafter amended,  and  all
 2             amounts   of  expenses  allocable  to  interest  and
 3             disallowed as deductions by Section  265(1)  of  the
 4             Internal  Revenue  Code of 1954, as now or hereafter
 5             amended;
 6                  (M)  An  amount  equal   to   those   dividends
 7             included   in  such  total  which  were  paid  by  a
 8             corporation which conducts business operations in an
 9             Enterprise Zone or zones created under the  Illinois
10             Enterprise  Zone  Act and conducts substantially all
11             of its operations in an Enterprise Zone or Zones;
12                  (N)  An amount equal to any  contribution  made
13             to  a  job  training project established pursuant to
14             the Tax Increment Allocation Redevelopment Act;
15                  (O)  An  amount  equal   to   those   dividends
16             included   in   such  total  that  were  paid  by  a
17             corporation that conducts business operations  in  a
18             federally  designated Foreign Trade Zone or Sub-Zone
19             and  that  is  designated  a  High  Impact  Business
20             located  in  Illinois;   provided   that   dividends
21             eligible  for the deduction provided in subparagraph
22             (M) of paragraph (2) of this subsection shall not be
23             eligible  for  the  deduction  provided  under  this
24             subparagraph (O); and
25                  (P)  An amount  equal  to  the  amount  of  the
26             deduction  used  to  compute  the federal income tax
27             credit for restoration of substantial  amounts  held
28             under  claim  of right for the taxable year pursuant
29             to Section 1341 of  the  Internal  Revenue  Code  of
30             1986; and.
31                  (Q)  An  amount  equal  to  any advance tuition
32             payment made pursuant to the Illinois State  Ensured
33             College  and  University  Responsive Education Trust
34             Act.
                            -36-               LRB9001905THpk
 1             (3)  Limitation.  The  amount  of  any  modification
 2        otherwise  required  under  this  subsection shall, under
 3        regulations prescribed by the Department, be adjusted  by
 4        any  amounts  included  therein which were properly paid,
 5        credited, or required to be distributed,  or  permanently
 6        set  aside  for charitable purposes pursuant  to Internal
 7        Revenue Code Section 642(c) during the taxable year.
 8        (d)  Partnerships.
 9             (1)  In general. In the case of a partnership,  base
10        income  means  an  amount equal to the taxpayer's taxable
11        income for the taxable year as modified by paragraph (2).
12             (2)  Modifications. The taxable income  referred  to
13        in  paragraph (1) shall be modified by adding thereto the
14        sum of the following amounts:
15                  (A)  An amount equal to  all  amounts  paid  or
16             accrued  to  the  taxpayer  as interest or dividends
17             during the taxable year to the extent excluded  from
18             gross income in the computation of taxable income;
19                  (B)  An  amount  equal  to  the  amount  of tax
20             imposed by this Act  to  the  extent  deducted  from
21             gross income for the taxable year; and
22                  (C)  The  amount  of  deductions allowed to the
23             partnership pursuant  to  Section  707  (c)  of  the
24             Internal  Revenue  Code  in  calculating its taxable
25             income;
26                  (D)  An amount  equal  to  the  amount  of  the
27             capital  gain deduction allowable under the Internal
28             Revenue Code, to  the  extent  deducted  from  gross
29             income in the computation of taxable income;
30        and by deducting from the total so obtained the following
31        amounts:
32                  (E)  The valuation limitation amount;
33                  (F)  An  amount  equal to the amount of any tax
34             imposed by  this  Act  which  was  refunded  to  the
                            -37-               LRB9001905THpk
 1             taxpayer  and included in such total for the taxable
 2             year;
 3                  (G)  An amount equal to all amounts included in
 4             taxable income as  modified  by  subparagraphs  (A),
 5             (B),  (C)  and (D) which are exempt from taxation by
 6             this State either  by  reason  of  its  statutes  or
 7             Constitution  or  by  reason  of  the  Constitution,
 8             treaties  or statutes of the United States; provided
 9             that, in the case of any statute of this State  that
10             exempts   income   derived   from   bonds  or  other
11             obligations from the tax imposed under this Act, the
12             amount exempted shall be the interest  net  of  bond
13             premium amortization;
14                  (H)  Any   income   of  the  partnership  which
15             constitutes personal service income  as  defined  in
16             Section  1348  (b)  (1) of the Internal Revenue Code
17             (as in effect December 31,  1981)  or  a  reasonable
18             allowance  for  compensation  paid  or  accrued  for
19             services  rendered  by  partners to the partnership,
20             whichever is greater;
21                  (I)  An amount equal to all amounts  of  income
22             distributable  to  an entity subject to the Personal
23             Property  Tax  Replacement  Income  Tax  imposed  by
24             subsections (c) and (d) of Section 201 of  this  Act
25             including  amounts  distributable  to  organizations
26             exempt  from federal income tax by reason of Section
27             501(a) of the Internal Revenue Code;
28                  (J)  With  the   exception   of   any   amounts
29             subtracted  under  subparagraph (G), an amount equal
30             to the sum of all amounts disallowed  as  deductions
31             by  Sections  171(a) (2), and 265(2) of the Internal
32             Revenue Code of 1954, as now or  hereafter  amended,
33             and  all  amounts  of expenses allocable to interest
34             and disallowed as deductions by  Section  265(1)  of
                            -38-               LRB9001905THpk
 1             the  Internal  Revenue  Code,  as  now  or hereafter
 2             amended;
 3                  (K)  An  amount  equal   to   those   dividends
 4             included   in  such  total  which  were  paid  by  a
 5             corporation which conducts business operations in an
 6             Enterprise Zone or zones created under the  Illinois
 7             Enterprise  Zone  Act,  enacted  by the 82nd General
 8             Assembly, and which does not conduct such operations
 9             other than in an Enterprise Zone or Zones;
10                  (L)  An amount equal to any  contribution  made
11             to  a  job  training project established pursuant to
12             the   Real   Property   Tax   Increment   Allocation
13             Redevelopment Act;
14                  (M)  An  amount  equal   to   those   dividends
15             included   in   such  total  that  were  paid  by  a
16             corporation that conducts business operations  in  a
17             federally  designated Foreign Trade Zone or Sub-Zone
18             and  that  is  designated  a  High  Impact  Business
19             located  in  Illinois;   provided   that   dividends
20             eligible  for the deduction provided in subparagraph
21             (K) of paragraph (2) of this subsection shall not be
22             eligible  for  the  deduction  provided  under  this
23             subparagraph (M); and
24                  (N)  An amount  equal  to  the  amount  of  the
25             deduction  used  to  compute  the federal income tax
26             credit for restoration of substantial  amounts  held
27             under  claim  of right for the taxable year pursuant
28             to Section 1341 of  the  Internal  Revenue  Code  of
29             1986; and.
30                  (O)  An  amount  equal  to  any advance tuition
31             payment made pursuant to the Illinois State  Ensured
32             College  and  University  Responsive Education Trust
33             Act.
34        (e)  Gross income; adjusted gross income; taxable income.
                            -39-               LRB9001905THpk
 1             (1)  In  general.   Subject  to  the  provisions  of
 2        paragraph (2) and subsection (b)  (3),  for  purposes  of
 3        this  Section  and  Section  803(e),  a  taxpayer's gross
 4        income, adjusted gross income, or taxable income for  the
 5        taxable  year  shall  mean  the  amount  of gross income,
 6        adjusted  gross  income  or   taxable   income   properly
 7        reportable  for  federal  income  tax  purposes  for  the
 8        taxable year under the provisions of the Internal Revenue
 9        Code.  Taxable income may be less than zero. However, for
10        taxable years ending on or after December 31,  1986,  net
11        operating  loss  carryforwards  from taxable years ending
12        prior to December 31, 1986, may not  exceed  the  sum  of
13        federal  taxable  income  for the taxable year before net
14        operating loss deduction, plus  the  excess  of  addition
15        modifications  over  subtraction  modifications  for  the
16        taxable year.  For taxable years ending prior to December
17        31, 1986, taxable income may never be an amount in excess
18        of the net operating loss for the taxable year as defined
19        in subsections (c) and (d) of Section 172 of the Internal
20        Revenue  Code,  provided  that  when  taxable income of a
21        corporation (other  than  a  Subchapter  S  corporation),
22        trust,   or   estate  is  less  than  zero  and  addition
23        modifications, other than those provided by  subparagraph
24        (E)  of  paragraph (2) of subsection (b) for corporations
25        or subparagraph (E) of paragraph (2)  of  subsection  (c)
26        for trusts and estates, exceed subtraction modifications,
27        an   addition  modification  must  be  made  under  those
28        subparagraphs for any other taxable  year  to  which  the
29        taxable  income  less  than  zero (net operating loss) is
30        applied under Section 172 of the Internal Revenue Code or
31        under  subparagraph  (E)  of  paragraph   (2)   of   this
32        subsection (e) applied in conjunction with Section 172 of
33        the Internal Revenue Code.
34             (2)  Special rule.  For purposes of paragraph (1) of
                            -40-               LRB9001905THpk
 1        this  subsection,  the taxable income properly reportable
 2        for federal income tax purposes shall mean:
 3                  (A)  Certain life insurance companies.  In  the
 4             case  of a life insurance company subject to the tax
 5             imposed by Section 801 of the Internal Revenue Code,
 6             life insurance  company  taxable  income,  plus  the
 7             amount  of  distribution  from pre-1984 policyholder
 8             surplus accounts as calculated under Section 815a of
 9             the Internal Revenue Code;
10                  (B)  Certain other insurance companies.  In the
11             case of mutual insurance companies  subject  to  the
12             tax  imposed  by Section 831 of the Internal Revenue
13             Code, insurance company taxable income;
14                  (C)  Regulated investment  companies.   In  the
15             case  of  a  regulated investment company subject to
16             the tax imposed  by  Section  852  of  the  Internal
17             Revenue Code, investment company taxable income;
18                  (D)  Real  estate  investment  trusts.   In the
19             case of a real estate investment  trust  subject  to
20             the  tax  imposed  by  Section  857  of the Internal
21             Revenue Code, real estate investment  trust  taxable
22             income;
23                  (E)  Consolidated corporations.  In the case of
24             a  corporation  which  is  a member of an affiliated
25             group of corporations filing a  consolidated  income
26             tax  return  for the taxable year for federal income
27             tax purposes, taxable income determined as  if  such
28             corporation  had filed a separate return for federal
29             income tax purposes for the taxable  year  and  each
30             preceding  taxable year for which it was a member of
31             an  affiliated   group.   For   purposes   of   this
32             subparagraph, the taxpayer's separate taxable income
33             shall  be  determined as if the election provided by
34             Section 243(b) (2) of the Internal Revenue Code  had
                            -41-               LRB9001905THpk
 1             been in effect for all such years;
 2                  (F)  Cooperatives.     In   the   case   of   a
 3             cooperative corporation or association, the  taxable
 4             income of such organization determined in accordance
 5             with  the provisions of Section 1381 through 1388 of
 6             the Internal Revenue Code;
 7                  (G)  Subchapter S corporations.   In  the  case
 8             of:  (i)  a Subchapter S corporation for which there
 9             is in effect an election for the taxable year  under
10             Section  1362  of  the  Internal  Revenue  Code, the
11             taxable income of  such  corporation  determined  in
12             accordance  with  Section  1363(b)  of  the Internal
13             Revenue Code, except that taxable income shall  take
14             into  account  those  items  which  are  required by
15             Section 1363(b)(1) of the Internal Revenue  Code  to
16             be  separately  stated;  and  (ii)  a  Subchapter  S
17             corporation  for  which there is in effect a federal
18             election  to  opt  out  of  the  provisions  of  the
19             Subchapter S Revision Act of 1982 and  have  applied
20             instead  the  prior federal Subchapter S rules as in
21             effect on July 1, 1982, the taxable income  of  such
22             corporation   determined   in  accordance  with  the
23             federal Subchapter S rules as in effect on  July  1,
24             1982; and
25                  (H)  Partnerships.     In   the   case   of   a
26             partnership, taxable income determined in accordance
27             with Section  703  of  the  Internal  Revenue  Code,
28             except  that  taxable income shall take into account
29             those items which are required by Section  703(a)(1)
30             to  be  separately  stated  but which would be taken
31             into account by an  individual  in  calculating  his
32             taxable income.
33        (f)  Valuation limitation amount.
34             (1)  In  general.   The  valuation limitation amount
                            -42-               LRB9001905THpk
 1        referred to in subsections (a) (2) (G), (c) (2)  (I)  and
 2        (d)(2) (E) is an amount equal to:
 3                  (A)  The   sum   of   the  pre-August  1,  1969
 4             appreciation amounts (to the  extent  consisting  of
 5             gain reportable under the provisions of Section 1245
 6             or  1250  of  the  Internal  Revenue  Code)  for all
 7             property in respect of which such gain was  reported
 8             for the taxable year; plus
 9                  (B)  The   lesser   of   (i)  the  sum  of  the
10             pre-August 1,  1969  appreciation  amounts  (to  the
11             extent  consisting of capital gain) for all property
12             in respect of  which  such  gain  was  reported  for
13             federal income tax purposes for the taxable year, or
14             (ii)  the  net  capital  gain  for the taxable year,
15             reduced in either case by any amount  of  such  gain
16             included  in  the amount determined under subsection
17             (a) (2) (F) or (c) (2) (H).
18        (2)  Pre-August 1, 1969 appreciation amount.
19                  (A)  If  the  fair  market  value  of  property
20             referred   to   in   paragraph   (1)   was   readily
21             ascertainable on August 1, 1969, the  pre-August  1,
22             1969  appreciation  amount  for such property is the
23             lesser of (i) the excess of such fair  market  value
24             over the taxpayer's basis (for determining gain) for
25             such  property  on  that  date (determined under the
26             Internal Revenue Code as in effect on that date), or
27             (ii) the total  gain  realized  and  reportable  for
28             federal  income tax purposes in respect of the sale,
29             exchange or other disposition of such property.
30                  (B)  If  the  fair  market  value  of  property
31             referred  to  in  paragraph  (1)  was  not   readily
32             ascertainable  on  August 1, 1969, the pre-August 1,
33             1969 appreciation amount for such property  is  that
34             amount  which bears the same ratio to the total gain
                            -43-               LRB9001905THpk
 1             reported in respect  of  the  property  for  federal
 2             income  tax  purposes  for  the taxable year, as the
 3             number of full calendar months in that part  of  the
 4             taxpayer's  holding  period  for the property ending
 5             July 31, 1969 bears to the number of  full  calendar
 6             months  in  the taxpayer's entire holding period for
 7             the property.
 8                  (C)  The  Department   shall   prescribe   such
 9             regulations  as  may  be  necessary to carry out the
10             purposes of this paragraph.
11        (g)  Double  deductions.   Unless  specifically  provided
12    otherwise, nothing in this Section shall permit the same item
13    to be deducted more than once.
14        (h)  Legislative intention.  Except as expressly provided
15    by  this  Section  there  shall  be   no   modifications   or
16    limitations on the amounts of income, gain, loss or deduction
17    taken  into  account  in  determining  gross income, adjusted
18    gross  income  or  taxable  income  for  federal  income  tax
19    purposes for the taxable year, or in the amount of such items
20    entering into the computation of base income and  net  income
21    under  this  Act for such taxable year, whether in respect of
22    property values as of August 1, 1969 or otherwise.
23    (Source: P.A. 88-195;  88-648,  eff.  9-16-94;  88-669,  eff.
24    11-29-94;  88-670, eff. 12-2-94; 89-89, eff. 6-30-95; 89-235,
25    eff. 8-4-95; 89-418, eff.  11-15-95;  89-460,  eff.  5-24-96;
26    89-626, eff. 8-9-96.)
27        Section 999.  Effective date.  This Act takes effect upon
28    becoming law.

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